The Quick Read: After seven fixed years, the lender takes a market index, adds the margin written in your note, applies the caps, and re-amortizes the balance, and the bank statement review that approved you is not repeated. The new rate depends on the formula and the market, not on how your company is doing. Every figure at this size is reviewed case by case before submission.
- The “7” is the fixed period in years, and the “6” is how many months pass between adjustments after that.
- Your deposits were tested once, at origination. The reset does not re-check income, credit or business health.
- Each full point of rate change moves annual interest by 1% of the balance, which is the main number to plan around at $4M.
- The caps in your note set the worst case, and the index sets the path you actually take.
- The real decision is your hold period: sell, refinance or pay down before year eight, or have reserves ready to absorb the change.
Key Terms Defined
Index: the market benchmark that moves after closing. Most modern 7/6 notes use an average of the secured overnight financing rate (SOFR), though each note names its own index.
Margin: the fixed percentage the lender adds to the index. It is set at closing and usually does not change.
Fully indexed rate: index plus margin, before caps and the floor.
Caps: limits on how far the rate can move. They come as three numbers in order: the first reset, each later reset, and the life of the loan.
Floor: the minimum interest rate the note allows, even if the index falls a long way.
Expense ratio: the share of business deposits a lender subtracts to approximate net income on a bank statement file.
Interest-only period: a stretch where you pay only interest, so the balance does not fall.
Recast: recalculating the payment over the remaining term after a reset or the end of an interest-only period.
What Does 7/6 Actually Promise?
It promises a level payment for seven years and nothing after that. The loan is normally a 30-year loan, so 23 years remain when the fixed period ends. It is not a seven-year loan, and it does not adjust once a year. The “6” means every six months.
Across the wholesale network Lendmire works with, 7/6 notes are priced to reward borrowers who expect to move on before the fixed period ends. The lower starting cost is the benefit. The reset is the price. At $4M, the price matters more than it does on a $400,000 loan, because every percentage point is a bigger number.
Lendmire, a mortgage broker that shops several wholesale programs, can place a seven-year fixed-period adjustable through a bank portfolio program, subject to full underwriting. Lendmire’s piece How a 5/6 or 7/6 ARM Lowers a Bank Statement Loan Payment covers the front end of this trade. This article covers the back end.
How Does a Bank Statement Loan Treat a Founder’s Income?
A bank statement loan reviews a founder’s income around deposits instead of traditional personal-income documentation. A founder’s returns are shaped by deductions, so they often understate what the business pays out. HousingWire’s non-QM guide describes the same problem: legal deductions can hide income on a return. Bank statements show the cash that moved.
Here is how the review works, step by step, through select wholesale programs:
1. Choose the statement window. Files use 12 or 24 consecutive months of personal or business statements. The bank program uses 12. Statements must be consecutive, and transaction histories do not substitute.
2. Confirm ownership. Business statements need at least 25% ownership.
3. Total the eligible deposits. Underwriters strip out one-time items, loan proceeds and unexplained transfers.
4. Apply the expense ratio. Common fixed ratios are 20% for a service business with no employees, 40% for one to five employees, and 50% for six or more employees or any product business. An accountant-provided ratio can also be used.
5. Divide by the statement months. That gives qualifying monthly income.
6. Test debt-to-income. Programs allow up to 50%.
Transfers from your own business into your personal account count in full. Founders who pay themselves in uneven lumps benefit from that rule, because the deposits count for what they are. Lumpy deposits, commingled accounts and a falling trend are what underwriters probe. A falling trend matters most, since an average hides a bad second half.
Credit follows the same logic. The floor is 660 on the portfolio non-QM program, which carries files to $6,000,000. It is 680 on the bank portfolio program, which carries twelve-month-statement files to $30,000,000. Above the super-jumbo line the floor is 700. These are floors, not the score a given leverage needs.
None of this is a no-document loan. It is reviewed on documented income under the applicable program, subject to lender guidelines. Bank statement files are also not unregulated. NCUA’s supervisory letter on ability to repay says non-QM loans are permitted when the repayment determination is documented. A bank statement review is that documentation.
How Much Can You Borrow at $4M, and on What Terms?
At $4M you sit on the seam between two programs, and everything is reviewed case by case before submission. On a primary residence, the portfolio program’s top band runs to $4,000,000. On review, it can reach 75% on a purchase, 70% on a rate-and-term refinance and 65% on a cash-out. Those cells want credit around 760 and carry super-jumbo overlays. Just above $4,000,000, the bank portfolio program’s ladder takes over. On review, it runs 65% on a purchase or rate-and-term and 60% on a cash-out, with credit of 680 or better for that leverage.
The ladder steps down with size on the bank program: 60% to $10,000,000 and 55% to $30,000,000 on a primary-residence purchase. Second homes and investment property take their own ladders, so read every figure from the occupancy’s own table.
The overlays above $3,500,000 on a primary residence, or $3,000,000 on a second home or investment property, include:
- a 700 credit floor
- a 0x30x24 housing history
- 48 months of seasoning after any credit event
- U.S. citizen or permanent resident status
- no non-occupant co-borrowers
- no rural property, and ten acres at most
Reserves run 3 months to $500,000, 6 months to $1,500,000 and 9 months above that. Add 2 months for each additional financed property, up to a 12-month maximum. First-time investors carry 12. Cash-out proceeds cannot satisfy reserves at this size.
Interest-only on the bank program tops out at 60% on purchase and rate-and-term files, and it applies to the 5- and 7-year fixed-period adjustables. A 10-year fixed-period adjustable is fully amortizing. Every figure here is through select wholesale programs, subject to full underwriting, and none is a commitment to lend.
What Happens on the Reset Date?
The lender runs a formula, and your income plays no part in it. The steps are the same on every note:
1. Look up the index. The note names the index and the look-back window. The New York Fed publishes SOFR averages every business day, and many notes reference one of them.
2. Add the margin. The margin was fixed at closing.
3. Round as the note says. Many notes round to the nearest eighth of a point.
4. Apply the caps and floor. The result cannot move more than the cap allows at this reset, and it cannot fall below the floor.
5. Set the new rate. It holds for six months.
6. Recast the payment. The balance is re-amortized over the remaining 23 years.
7. Repeat in six months. Each later change is limited by the periodic cap.
The reset ignores payment history, job changes and credit score. The loan was underwritten once, and the formula governs from there.
Here is what that does to a $4M balance. The table is illustrative: it shows the size of the move, not a forecast, and it uses no real rate.
| Reset result vs. old rate | Annual interest change | Reading |
|---|---|---|
| Down 1 point | Falls by 1% of balance | Floor may limit it |
| Unchanged | No change | Payment still re-amortizes |
| Up 1 point | Rises by 1% of balance | Size it against your reserves |
| Up 2 points | Rises by 2% of balance | Reserves start to matter |
| Up 3 points | Rises by 3% of balance | Plan the exit before this |
The payment change is a little different from the interest change on an amortizing loan, because the recast spreads the balance over 23 years instead of 30. On an interest-only loan, the payment moves with the rate directly. If your interest-only period ends at the same moment, you face two changes at once. Ask exactly when your note’s interest-only period ends.
Where the General Rule Breaks
The cap structure differs by program. Mainstream agency ARMs follow a common cap pattern, but non-QM and jumbo notes set their own. Do not assume you have the common pattern. If the first-reset cap equals the lifetime cap, you can reach the ceiling at the very first reset. Read the three numbers in your note before you sign.
The index and look-back differ by note. One note may use a 30-day SOFR average, another a longer window or a different index. The look-back date is stated in the note. Ask which one it is, and ask where the date sits relative to your change date.
Notices have timing rules. For consumer-purpose adjustable loans, servicers must send the first adjustment notice 210 to 240 days before the first new payment is due. Later notices go out 60 to 120 days ahead, according to the Federal Register’s mortgage servicing rule. A founder’s owner-occupied home is a consumer file, so those notices should apply. Whether they apply to a business-purpose investment property depends on loan purpose, so confirm it for yours. Either way, treat the notice as a reminder, not as your planning start.
Prepayment penalties can block an early exit. Investor notes often carry them. If you plan to refinance at the reset, check the penalty schedule first, and see whether it has expired by year seven.
Occupancy changes the picture. A primary residence, a second home and an investment property each use their own leverage ladder. Second homes are one-unit only. The same $4M balance can mean a different ceiling depending on how you use the property.
A founder’s income can shift before the reset. A liquidity event, an equity raise or a down year all change what you can show for a refinance later. A reset has no memory of any of them, but your exit does.
Can Assets Replace the Statement Review for a Founder Between Paychecks?
Yes, in certain cases, and it is worth knowing before you choose a loan. After an exit or a funding round, a founder may hold plenty of liquid assets and few deposits. Two asset paths exist through select wholesale programs. They apply to primary and second homes only.
An asset allowance divides liquid assets by 36, 60 or 84 months and treats the result as income. It uses 84 months when it stands alone, or on any loan above $3,500,000. An assets-only path needs no debt-to-income test when U.S. liquid assets equal the loan plus closing costs, plus sixty months of any net loss on other residential property.
Retirement accounts count at 70%, or 80% from age 59½. Business funds, gifts, unvested stock and cryptocurrency never count. Tax treatment varies; consult a qualified professional.
A Reset Timeline for Years Four Through Seven
Plan backward from the change date. Here is the schedule most founders should follow:
- Year 4: Read the note for the index, the look-back, the three cap numbers and the prepayment schedule. Write down the worst case at each cap.
- Year 5: Compare your balance against the property’s value. Decide whether you will sell, refinance or hold. Update your statements and your accountant’s expense ratio so you can show a clean file.
- Year 6: Size your cushion. Take the worst-case payment from the caps and ask how many months you can carry it from liquid reserves. Nine months is the program standard at this size, so treat that as a minimum, not a goal.
- Six and a half years: Start the refinance if you want one. The first notice has typically arrived by now. A refinance needs a fresh review, so your deposits must hold up on their own then.
A refinance is a new file. It will use the program’s rules at that time, which may differ from today’s, and a down year in year seven will show up in the statements. That is the real exit risk: the loan can reset on formula, but a replacement loan needs current numbers.
ARM or Fixed at This Loan Size?
| Factor | Favors the ARM | Favors fixed |
|---|---|---|
| Hold period | Under seven years | Longer than seven |
| Reserves | Deep, liquid cushion | Thin or tied up |
| Cash-flow need | Lower early outlay | Predictability first |
| Income stability | Steady or rising | Lumpy or declining |
| Exit plan | Sale or paydown set | Open-ended hold |
On a loan this size, a founder with a defined exit and deep reserves has a good case for the ARM. A founder who plans to hold for a decade and whose income swings has a harder case. A 10-year fixed-period adjustable is also available on the bank program, but it is fully amortizing. That changes the early payment picture.
A bank statement loan and a DSCR loan are separate tools. The first is reviewed around personal or business deposits. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Founders who hold rentals often use both. The complete DSCR loans guide explains when the property’s rent is the stronger qualifier. In the Optimal Blue data HousingWire reports, bank statement loans were about 34% of non-QM volume and DSCR loans about 29%.
Exit Paths Before the Reset
You have three, and they can be combined:
- Sell. The cleanest exit, as long as no prepayment penalty applies.
- Refinance. This needs a new review, so line up current statements first.
- Pay down. A lump-sum principal payment shrinks the base the new rate applies to. If your note has a recast option, it lowers the payment too.
Frequently Asked Questions
Does the reset re-check my income or credit?
No. The rate change is formula-driven: index plus margin, rounded, then limited by the caps and floor. Your statements were reviewed at origination. Credit and income come back into play only if you refinance.
Can the rate go down at the first reset?
Yes, if the index has fallen, but only as far as the note’s floor allows. The caps limit increases and the floor limits decreases. Read both in the note, because neither is the same across programs.
What is the worst case on a $4M balance?
It is set by the cap structure in your note. Each full point of rate change equals 1% of the balance in annual interest. If your first-reset cap is large, the first change can be large too, so size your reserves against the cap, not the index.
Does a 7/6 ARM adjust every year after seven years?
No. It adjusts every six months. The second number in 7/6 is the interval in months, which surprises many first-time ARM borrowers.
Should a founder with uneven income choose a fixed rate instead?
It depends on the exit plan. A defined exit and deep reserves support the ARM. An open-ended hold and income that swings favor fixed. Either way, the 24-month statement window can smooth a weak stretch, while the bank program’s 12-month window rewards a strong recent year.
Compare Your Options
If you are financing a high-balance property on business or personal bank statements and want to see how the numbers work, Lendmire can help you compare super jumbo bank statement loan options based on your deposits, the property, credit profile, leverage and your goals. Lendmire’s consumer mortgage lending is licensed in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA and WA.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging bank statement and other alternative-documentation mortgages — P&L-only, 1099-only and asset-based paths — through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HousingWire, non-QM loans guide
2. NCUA Supervisory Letter 14-01
3. Federal Register, mortgage servicing rule
This article is part of Lendmire’s super jumbo bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a 12 Month Bank Statement Jumbo Loan Works · Can a Founder With Irregular Pay Get a Super Jumbo Bank Statement Loan? · How a Bank Statement Jumbo Loan Works in Santa Fe
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.